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For the 19 nationalised banks, the just-concluded fiscal year was a washout insofar as their core activity — lending –– is concerned: their aggregate loan book contracted 1.68 per cent in 2015-16.
Only some heavy lifting by the State Bank of India Group — whose loan book grew a healthy 10.56 per cent — ensured that the overall public sector banks’ loan book grew at all –– and even then, only by a measly 2.26 per cent.
That is quite below par, if not abysmal, for PSBs, which account for 70 per cent of aggregate lending in the banking system. To some analysts, it raised fresh doubts about the veracity of GDP growth numbers.In the March quarter, the economy surprised on the upside by growing at 7.9 per cent.
“Clearly, there is stagnancy in banking on both fronts: credit and deposits. The loan book contraction of nationalised banks is an eye-opener. These banks must reorient their model and go in for focussed retail lending,” Devidas Tuljapurkar, Chairman, Banking Education and Training Research Academy (BETRA), told BusinessLine . BETRA, an Aurangabad-based non-profit, has brought out a compilation of PSBs’ performance in 2015-16.
Even on the deposit mobilisation front, the 19 nationalised banks’ deposits grew 1.74 per cent, while the overall PSBs’ deposit growth was 4.32 per cent. Here again, the SBI Group turned out a good performance, with 9.77 per cent growth in deposits. PSBs have in recent years resorted to the shortcut of focussing on “bulk” –– whether it be for mobilising deposits or for lending to large corporates.
Now, they will have to give up the “bulk” model and focus on the “ aam aadmi (common man),” said Tuljapurkar.
NPA worries One explanation for the loan book degrowth of nationalised banks could be that the recent RBI move to get banks to account for NPAs conservatively is having a chilling effect on lenders. Bankers have gone into a shell after names of some high-profile ‘wilful defaulters’ became public. They don’t want to be seen to be overeager to grow the loan book when NPA skeletons are tumbling out of their cupboards following the RBI-mandated asset quality review.
For the March quarter, PSBs logged ₹23,493-crore loss, with as many as 15 of them reporting loss at the net level.
Clearly, most PSBs are paying the price for their past sins of profligate lending to big corporate houses.
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